After two administrations, the mining industry is finally seeing the proverbial light at the end of the tunnel, but the challenge to ensure responsible mining by minimizing its impact to the environment and community remains.
Unlike the Aquino and Duterte administrations, the Marcos administration has put minerals development high on its economic and even geopolitical agenda. Even in his official visits and speaking engagements, such as in the recent Asean Meeting, President Ferdinand Marcos Jr. boldly declared that the Philippines is going “beyond extracting the minerals to producing batteries to prop up the local value chain” and would need technology and strong industry participation for it to materialize.
Following his pronouncements, the DENR is now looking at mining playing a key role in the global market as a supplier of green metals while developing the country’s capacity for value-adding through downstream processing of these minerals.
Representing DENR Secretary Maria Antonia Yulo-Loyzaga during an international mining conference and exhibition organized by the mining industry’s big players in Mandaluyong City last month, Undersecretary for Integrated Science Carlos Primo David, in his keynote address, declared that the Philippines can be in a unique position to be an important player in the global clean energy market and provide sustainable solutions to the climate crisis.
David, a geologist and expert in environmental science, added that the climate emergency is driving the global clean energy transition, which involves the generation of renewable energy, the need for energy storage, and other new technologies, such as those related to the supporting infrastructure and manufacture of electric vehicles—which boosts the idea of mining the so-called “green” metals or energy transition metals. But are we ready for it?
Green metal what?
BUT what are these so-called green or energy transition metals and what is their potential to boost the country’s transition to renewable energy and a sustainable, low-carbon future?
Michael Toledo, chairman of the Chamber of Mines of the Philippines (COMP), said energy transition metals comprise the metallic elements needed to produce renewable energy technologies, which require substantial amounts of metals such as copper and nickel.
The Philippines is rich in both copper and nickel, two of the 16 major metallic raw material inputs to renewable technologies.
Of the nine clean-energy technologies, seven need copper: electric motors, carbon capture and storage, electric vehicles, nuclear power, solar photovoltaics, light-emitting diodes, and wind.
Seven technologies require nickel: energy storage, carbon capture and storage, electric vehicles, nuclear power, solar photovoltaics, light-emitting diodes, and wind, Toledo said.
Why do we need them?
TOLEDO explained that in 2021, the World Bank reported that the planet would need more than 3 billion tons of minerals and metals to enable mankind to respond to the threat of climate change.
He further explained that the target is to keep the global temperature from rising this century well below 2 degrees Celsius and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.
“This in large part can be addressed through energy transition, that is, by shifting from fossil fuel-based energy sources to renewable energy sources. This begins with metals. Essentially, we have to electrify the world, and that would need metals—lots of them. Metals are critical to all parts of the energy transition,” he explained.
THE Philippines has been exporting minerals before the “green metals” or “energy transition metals” were coined. In fact, other than gold, copper, a precious yellow metal like gold, and nickel are on top of the country’s annual mineral production value outputs.
Asked if the volume of production of these energy transition metals in the Philippines is sufficient to make the country a key player in the global green metals market, Toledo said possibly, yes… but there are numerous factors to be considered.
Currently, Toledo said Indonesia already accounts for about 55 percent of the global nickel supply in terms of processed nickel in various forms. Its output of nickel in various forms is about 5.5 times larger than the Philippines; Indonesia’s nickel ore resources are 4 times larger than the Philippines.
Currently, the Philippines has 34 nickel mines, and four more nickel mines are expected to go on stream between 2023 and 2025, according to the Mines and Geosciences Bureau (MGB).
A future EV battery producer?
TO venture into electric vehicle batteries, the demand for which continues to grow exponentially with the popularity of this environment-friendly mode of transportation, the Philippines needs to dig up more nickel ores before putting up more processing plants. Currently, the Philippines only has two nickel-processing plants.
According to Philippine Nickel Industry Association (PNIA) President Dante Bravo, value-adding processing plants will greatly contribute to the value of the country’s raw metal ores, as well as map our mineral areas to determine where the higher-grade deposits are. “However, we need to further discuss with government stakeholders the viability and requirements of putting up value-adding processing plants,” he said.
Aside from the significant cost and investment in putting up the plant, a nickel processing plant, to be operational, will require upwards of 100 million tons of raw nickel ore for at least 20 years to be considered viable, Bravo said.
Toledo, for his part, added that putting up more plants is easier said than done. It would cost around $1 billion, at least, to put up a high-pressure acid leach (HPAL) plant.
“If new HPAL plants were to be constructed here, we may be able to participate in the actual manufacture of batteries. But that would depend on several factors, including the development of large nickel deposits that can accommodate an HPAL plant, or of a custom HPAL plant buying nickel from several mines,” he said.
With an insufficient supply of nickel ore, it wouldn’t be wise to put up a nickel processing plant—otherwise, Toledo said, the Philippines would be importing nickel ore to have adequate feedstock to make the nickel-processing venture feasible.
Meanwhile, Chile, the top copper producer globally with 29 percent of global copper production, will remain the world’s biggest copper producer in the foreseeable future, says Toledo.
“Should the Tampakan, King King and Silangan copper-gold projects begin production within this decade, we will be able to elevate the Philippines’ standing among the world’s top copper producers,” Toledo said.
ACCORDING to Toledo, the transition to clean energy will be mineral-intensive, requiring a variety of specific metals: aluminum, chromium, cobalt, copper, indium, iron cast, iron magnet, lead, lithium, manganese, molybdenum, nickel, silver, steel (engineering) and zinc.
Metal-intensive renewable energy technologies include electric motors, solar concentrating, energy storage, carbon capture and storage, electric vehicles, nuclear power, solar photovoltaics, light-emitting diodes, and wind, he said.
But why is the mining industry so excited about energy transition metals?
“Our enthusiasm stems mainly from the government’s acknowledgment of mining as a priority sector that is in a good position to take advantage of opportunities in the energy transition and, as such, with a high growth potential that will help our economy recover,” Toledo said.
Toledo said the industry is nevertheless keenly aware that the government will only push for responsible and sustainable mining, not just the extraction of minerals per se, but also the implications of our industry on the integrity of the ecosystem and the livelihood and well-being of communities. “We like to think we are up to the task,” he said.
For its part, the Philippine Nickel Industry Association (PNIA), headed by its president, Dante Bravo, said the country is one of the most mineralized countries in the world, and in a unique position to be a major supplier of green metals, as far as nickel requirement is concerned.
“The Philippines is one of the most mineralized countries in the world and yet only 2 percent of its mineral resources have been tapped. With the shift in demand for transition metals, the local mining industry has a unique position to leverage its capacities and be a key player in the global market, making the country an integral component of the global energy value chain. This would result in a significant increase in the country’s GDP, more opportunities for employment, and overall globalization of the country,” he said.
Huge economic potential
TOLEDO said there are a lot of economic benefits from mining—including jobs and livelihood opportunities which all translate to more revenues for the government, and money changing hands is healthy for the economy, ensuring growth and boosting national and local development.
“By themselves, the three copper-gold projects, all in Mindanao—Silangan, Tampakan and King King—can increase national government revenues by P12 billion a year, local government revenues by P1.5 billion, exports by almost US $2 billion, and social expenditures by close to P800 million per year. Also, royalties to the indigenous tribes of a little over P600 million per year. These are just three projects. The potential is even greater over the years if we can have stable mining policies,” says Toledo.
According to Toledo, more economic benefits are expected if Nickel Asia Corp. (NAC) succeeds in acquiring the rights to the Pujada mine, which can accommodate one HPAL plant—NAC’s third in the Philippines—and if Global Ferronickel Holdings Inc.’s plan to build an HPAL facility with a Chinese partner materializes.
For his part, Bravo said presently, the mining sector continues to be a major contributor to the economic recovery and a significant employer of the country’s workforce despite global headwinds and inflation.
“Expanding the capabilities of the industry through value-added processing and thus increasing its contributions to downstream industries, including energy, will allow the nickel industry to contribute further to regional and national economies by being able to supply the growing demand for nickel with more valuable exports,” he said.
THE demand for metals is ever-increasing. With the clamor to transition to green energy, the demand for green metals also increases.
Currently, Toledo said China, Japan, and a few other Asian countries remain the primary export markets for the Philippines’s mining production exports.
Per McKinsey & Co., global electrification for clean energy technologies is expected to increase copper demand from about 25 million tonnes today to 36.6 million tonnes by 2031, with supply then forecast to be around 30.1 million tonnes, creating a 6.5-million tonnes shortfall at the start of the next decade.
“McKinsey also estimated nickel demand to increase from 2.2 million tonnes in 2020 to 3.5 million to 4.0 million tonnes by 2030,” he said.
Current supply shortfall
SO, how much can these demands be supplied by mining companies operating in the Philippines? Toledo said: “It is quite difficult to provide an estimate on how much of the demand can be supplied by operating mines here. According to the World Bureau of Metal Statistics, the Philippines produced 52,000 tonnes of copper in 2021 and, per MGB data, we only have three operating copper mines. That translates to about 0.20 percent of current global demand.”
On the other hand, Toledo noted that Statista figures show that the Philippines’s nickel production volume in 2022 was at 330,000 tonnes—from 33 operating nickel mines last year, according to the MGB. That production is around 15 percent of current demand.
For the demand for nickel, Bravo said the industry, at its current size and capacity, can generate 40 million wet tonnes of raw nickel ore in a year, given favorable climates with longer dry seasons.
But for its entirety, Toledo said there is no single country that has enough mines to meet the demand for energy transition metals to meet global carbon emission reduction targets.
“As such, our mining sector should be further supported to help ease the projected supply shortfall in metals needed to produce renewable energy technologies. Apart from extracting minerals, miners may also explore the option of building recycling into their supply chain. A recent Forbes article points out that recycling can give miners a huge advantage in terms of supplying metals to such manufacturers as Tesla, enabling these miners to gain market share, higher ESG premium credits, and revenue from scrap metals. It’s worth looking into,” he said.
Fiscal regime: a stumbling block?
A NEW fiscal regime is looming and COMP is pushing for one that will be profit-based to make the industry more competitive and attractive to investors.
“Investors are at the moment in a wait-and-see mode. Although the House of Representatives has passed HB 8937, which introduces new features to the country’s mining fiscal regime, the Senate has yet to pass its version. Until we see a mutually acceptable tax scheme in place, we believe potential investors will continue to delay making investment decisions in the mining sector,” he said.
Finally, Toledo said, to realize the Marcos administration’s plans to just go beyond extracting minerals and become a producer of these energy transition metals and manufacturer of products like EV batteries, there’s a need to make the Philippines attractive to investors, as huge amounts of capital are required to explore and develop new mines and to build processing facilities.
Wanted: government support, friendly policy environment
FOR the country’s mining industry to make its so-called takeoff, government support and a friendly policy environment are needed.
Bravo said the country currently does not have enough operating nickel mines to sustain the growing demand for energy transition.
In addition to the new mines and value-added processing capabilities needed, the country will benefit from a much-awaited mapping of its mineral resources to determine the longevity and capacity of support.
“We have spoken to government officials about how critical mineral mapping and feasibility studies are, as these will be the basis of the viability of processing plants, identification of areas where to construct these plants, and judgment on the classification of raw nickel ore present, whether low, medium, or high grade.”
“There are a lot of factors that go into putting up a processing plant, however, basing it off the model of Indonesia’s nickel industry, the economic gains from this endeavor will far outweigh the initial costs of investment,” he said.
On the other hand, Toledo said the Philippines needs to be more open to exploration and resolve the remaining issues affecting the investment climate in the industry after the removal of the ban on open-pit mining and the moratorium on new mining projects.
“These issues include conflicting local and national laws, our country’s high power costs, a protracted permitting process, and a fiscal regime that will not only enhance our country’s competitiveness as a mining investment destination but equally important, reflective of the government’s designation of mining from being merely a ‘beneficial’ industry to one that is ‘essential’ and ‘critical,’” he said.
“We in the Chamber of Mines believe further discussions and, more importantly, actions are necessary before we can truly say that mining in the Philippines is back in business,” he said.